Retirement Planning for Nurses: A Beginner’s Guide

Nurses, like many professionals, build their confidence by learning, asking questions, and then doing. However, according to a Fidelity Investments®Money FIT Nurses Study, more than half of nurses surveyed (56%) say they lack confidence in making financial decisions.

But Alexandra Taussig, senior vice president of marketing and business management at Fidelity Investments, believes that while more than half of nurses lack confidence when it comes to managing their money, it is often unwarranted.

“Many nurses are diligent savers and are actively saving for their retirement, so it may start with a mental shift,” says Taussig. “The more educated nurses are about financial planning and investing, the more empowered they will be to control their financial future.”

Steven A. Boorstein, president and CEO at RockCrest Financial LLC, recommends nurses who are hesitant about making financial decisions to start small. “Starting something begins to take you down the right path now. Over the course of a year or two, if you tackle the small issues, you find that you’ll start to clear up the mess and can focus on the bigger issues (e.g., student loans, retirement, major purchases, college planning for your children).”

According to Taussig, one specific step nurses can take regarding retirement planning is to strive to save 15% of their salary (including any employer match) each year towards their retirement. If that is too difficult to start, commit to increasing savings 1% each year until you get to the 15% savings rate.

For nurses in their mid-30’s or later who haven’t started planning, Boorstein says it’s critical to not only start saving, but also to start setting specific financial and retirement goals.

“As you get into that age range, college planning, housing expenses, childcare, retirement, and other issues start to become more important,” he says. “It’s easy to push those things off, but in your thirties they are now more prominent and are going to take potentially more effort to solve.”

Making Time to Plan

The same Fidelity Investments study found that four in 10 nurses (41%) attribute their lack of confidence in their financial decisions to not having enough time to focus on them. But taking steps to address your financial future is not as difficult as many of us like to think. Just as the health care community encourages patients to get annual physicals; a similar approach can apply to your own financial wellness. Taussig suggests the following:

Write down your financial goals.

Taussig recommends writing them down as it helps visualize and feel more accountable. Also think about the timeline when you want to reach each goal.

Check retirement readiness.

Check your retirement score to see how you are tracking toward your savings goal. After answering a few quick questions, find out if you’re in the green, yellow, or red “zones” and learn how small adjustments may help bolster your readiness

Get guidance at work.

Find out what financial resources your employer offers. Schedule a time to talk with a financial professional to discuss your financial goals and retirement readiness.

Knowing When to Retire

Nurses have always worked past the traditional age of retirement. But Taussig believes when it comes to preparing for retirement, age is an important factor when making some decisions, and less critical in other areas. For instance, she says age is a significant factor when it comes to tapping into benefits such as Social Security, because eligibility is determined by one’s age. The longer a person can wait before they start taking social security (up to age 70), the greater the social security monthly benefit will be. So, it’s important to understand what you are eligible for and at what age.

“Furthermore, full retirement age (which differs depending on the year you were born) is when people are entitled to begin receiving their full monthly benefit,” Taussig explains. “However, many people (often more women than men) take benefits earlier than Full Retirement Age—meaning they lock in a reduction to this benefit for life.”

Age should also be considered when investing, especially for a substantial goal like retirement. The longer a person can invest their savings, the longer their investments can potentially grow. However, Taussig says age is less important in determining one’s mental and physical readiness for retirement.

“There are many factors that people need to consider as they prepare for retirement in addition to their finances—they need to look holistically at their job situation, their health, their family obligations, lifestyle needs, etc.,” she says. “Having a sense of readiness comes less from achieving a certain age, and more from feeling that all those elements are well-aligned.”

Avoiding Mistakes

There are a number of pitfalls nurses can make when retirement planning. Taussig says that taking loans from retirement savings plans is a huge blunder. Even more, she says they’ve seen an increase in the number of loans nurses are taking from their retirement savings plan. From 2012 to 2015, outstanding retirement account loans has grown 35%.

“Nurses should borrow from their workplace retirement savings only as a last resort,” she says. “These types of loans, like any other, are another expense that must be paid and the impact to their total retirement savings may be greater than they expected.”

Boorstein says not protecting income is the one of the biggest retirement planning mistakes he sees people make. They don’t know the risk that they are taking with their investments and either stay too aggressive or become too conservative in retirement.

“As you get to the last 10 years or less before social security kicks in, I think the discussion needs to shift from how much a person has in assets to what kind of income that they can generate throughout the rest of their plan,” he says. “And that usually requires taking money that is probably in riskier investments at that point, and shifting it into investments that can help them sustain a certain standard of living no matter what the stock markets do over the short or intermediate term.”

Lastly, Taussig says most employers offer financial guidance as a free employee benefit but 62% of nurses who are eligible for free workplace guidance don’t take advantage of it. However, guidance is important and can lead to action.

“Fidelity data finds that 35% of nurses take actionn after receiving guidance,” she says. “For instance, of those nurses, 69% of those that have taken action increased their retirement savings contribution without 90 days of completing a guidance interaction by phone, in person or online.”

Boorstein advises nurses who have not started saving or investing, to start creating a retirement plan today. Once you’ve done that, he suggests coordinating your plan with your other goals and risks.

“Review your plan every six months to a year and gauge where you are at that point. It’s much easier to make small adjustments than it is major changes,” he says. “If you’re 37 and you make 30 small adjustments every year, it’s much easier than waiting to do your retirement plan at 60 and realizing you only have seven years to make major life changes and it may just not be possible.”